FCC chief revamping $8 billion fund

Under pressure to expand high-speed Internet access around the country, Federal Communications Commission Chairman Julius Genachowski will Monday lay out a plan to revamp an antiquated $8 billion program to fund new broadband networks.

Modernizing the program, known as the Universal Service Fund (USF), is a key part of meeting President Barack Obama’s goal of bringing wireless broadband connections to 98 percent of the country’s population, Genachowski told POLITICO. Obama touted that goal during the State of the Union address last month.

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The USF program is one of the most arcane issues the FCC plans to tackle this year. It was formed 14 years ago to pay for telephone lines in low-income and rural areas. All phone companies must contribute some of their revenue to the fund, which costs nearly $8 billion a year.

But the fund, mandated by Congress, does not support the build-out of broadband networks, even as consumers increasingly rely on the Internet rather than traditional phone lines to communicate.

“In the 21st century, high-speed Internet, not telephone, is our essential communications platform,” Genachowski plans to say Monday in his remarks at an event hosted by the Information Technology and Innovation Foundation. “And while the world has changed around it, USF — in too many ways — has stood still or fallen behind.”

Genachowski plans to lay out a framework on how to transform the fund from one that supports voice telelphones to one that supports broadband. The full commission vote on whether to adopt his framework on Tuesday.

Reforming the fund has been a long-time challenge for the FCC, and Genachowski hopes to improve some of the inefficiencies that plague it. The out-dated system results in highly inconsistent funding. For example, the fund pays $20,000 a year to support a single phone line in some rural communities, but provides no support in other communities that are still without broadband access. Such a system has created what Genachowski refers to as a “rural-rural” divide.

“The need for USF reform continues to increase,” said Howard Waltzman, who served as chief telecommunications counsel for the House Energy and Commerce Committee. “You have a system that’s largely based on assumptions that are more than a decade old.”

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CORRECTION: Corrected by: David Cohen @ 02/06/2011 11:03 PM
CORRECTION: A previous version of this story said the Universal Service Fund costs $9 billion annually. Estimates vary from year to year, but the FCC's current official projection is $8 billion.